KEITH OLBERMANN, “COUNTDOWN” HOST: -- remember the new slogan, you‘ve got oil on your tinfoil—ladies and gentlemen, here back from the wars, or something, is Rachel Maddow.Good evening, Rachel.RACHEL MADDOW, HOST: Good evening, Keith. It‘s very good to see you. Thanks for that.OLBERMANN: Good to see you too.MADDOW: Thanks.OLBERMANN: Nice picture, by the way.MADDOW: I don‘t want to talk about it. I don‘t want to talk about it. And you know me well enough to know I don‘t want to talk about it. And now, I have to dig up your high school photo.OLBERMANN: Oh, trust me—it looks just as bad as this picture does right now.MADDOW: Thank you, Keith.And thanks to you at home for staying with us for the next hour.We do begin tonight with some breaking news. With the images that pretty much everyone on the Gulf Coast has been waiting and watching for all day—maybe all summer. What you‘re looking at here is footage from just about an hour ago, a mile under water in the Gulf of Mexico at the site of the BP oil disaster, where a new cap has just been successfully lowered on to the broken oil well.This new and improved cap is a much tighter fit than the old one, apparently. It still has to be tested and monitored for two days to see if it totally works. But if it works the way it‘s supposed to, BP will soon be able to capture essentially all of the leaking oil from the ruptured well.The millions of gallons that has already leaked out is, of course, still out there, in the Gulf, creating environmental ultra-havoc. But, again, if this cap works, the continuing leak at the source will finally be under control.But while residents of the Gulf are watching the engineering response in the Gulf, watching the underground oil volcano and waiting for it to stop spewing oil so they‘ll know just how big a disaster they‘re really facing, the political response to the BP oil disaster inches along in Washington, D.C. “The Washington Post” reporting today that with Congress back from the Fourth of July recess, Senate Democrats are looking to reconfigure an energy bill that among other things would require “BP to assume full liability for damages in the Gulf of Mexico.”“The Washington Independent” describes the new energy bill as being, quote, “cobbled together from a number of existing proposals.”And, of course, as usual, all this legislative retooling and cobbling together will be aimed at coming up with—not the best energy bill possible for the country, but the best energy bill that two or three Republicans will also vote for.And in that context, consider it constructive that the highest profile Republican campaign fund for the midterm elections was started with oil money. It‘s a group called American Crossroads. It‘s run by Karl Rove and former Republican Party chairman, Ed Gillespie. Its publicly stated goal is to raise $52 million for Republican candidates this election year.After a few hiccups here and there, the group seems to be well on its way now and is already spending millions on ads. The group‘s seed money, its first $1 million check, came from the president of Chief Oil and Gas in Texas.How does an oil company think it‘s going to benefit from a big investment in Republican candidates for this year‘s elections? I don‘t know. The mind of an oil company executive is a depth I have yet to plume.But the Republican political response to the BP oil disaster is getting just plain weirder and weirder as time goes on. We already went through the criticizing BP is un-American comment from Senate candidate Rand Paul. We went through the “this shows we need less oil industry regulation” comment from Republican Sharron Angle.We went through the “apologize to BP” outburst from the top Republican on the House Energy Committee, Joe Barton. We went through the “BP paying oil spill victims is a shakedown and a slush fund.” We went through that accusation from not just Joe Barton, but from a whole chorus of Republicans.But even after all of that, things now are getting even weirder. Listen to what Republican Congressman Paul Braun of Georgia had to say about the BP oil disaster at a town hall event on Thursday.(BEGIN VIDEO CLIP)REP. PAUL BROUN ®, GEORGIA: What we‘ve already seen from our president is that he is utilizing this crisis of this oil spill to try to promote his energy tax. And I‘ve had numerous people, all over the district, question whether his poor response to this oil spill was purposeful so that he could promote his energy tax. Now, I don‘t know.(END VIDEO CLIP)MADDOW: Yes. President Obama and BP conspired to blow up the Deepwater Horizon oil rig and let the oil keep spewing into the Gulf of Mexico for months so they could advance their shared evil plan to tax carbon.Congressman Broun‘s theory, of course, comes on the heels of this bit of extravagantly kooky paranoia from Republican congressional candidate, Bill Randall from North Carolina.(BEGIN VIDEO CLIP)BILL RANDALL ®, NORTH CAROLINA CONGRESSIONAL CANDIDATE: This is purely speculative and not based on any fact, but personally I feel, there is a possibility that there was some sort of collusion—I don‘t know how or why—but in that situation, if you have someone from a company proposing to violate the safety process and then the government signing off on it, excuse me, maybe they wanted it to—leak.(END VIDEO CLIP)MADDOW: Maybe they wanted it to—leak.So, the Republican political response to the BP oil disaster now includes a variety of apologies to BP and accusations that the whole disaster was planned on purpose by BP and the evil government and the Freemasons in black helicopters with the fluoride or something.And, right now, somewhere in Washington, Senate Democrats have the task of trying to put together an energy bill that will win some Republican votes in this context. Good luck with that.Joining us now is Jonathan Alter, “Newsweek” columnist, MSNBC political analyst, and the author of the best-selling book, “The Promise: President Obama Year One.”Jon, thanks very much for being here.JONATHAN ALTER, MSNBC POLITICAL ANALYST: Hi, Rachel.MADDOW: So, it‘s obviously good news if that cap is going to work.ALTER: Yes.ALTER: But this crisis is going to continue to go on, even if they got that under control, even if we‘re just talking about the clean up.Why isn‘t it true that this disaster in the Gulf has created a political opportunity for energy reform? Why hasn‘t—why hasn‘t that happened?ALTER: It‘s a great question, because it should have been the kind of 9/11 of domestic policy, and also a foreign policy issue. And there were some real hopes that it would have a transformative effect. It hasn‘t happened that way because our politics are so polarized that whereas after 9/11, you could get this kind of bipartisan action to transform American foreign policy, transforming energy policy is still largely a partisan issue—although there are some Senate bills sponsored by Republicans, like Richard Lugar, that have more things like nuclear energy in them, that are part of what is being cobbled together now in the Senate.But it‘s important to understand that this bill that they‘re going to come up with and try to get through—they basically just have a month, less than a month before the August recess—is not going to be a cap-and-trade bill. It is no going to have a price on carbon. That will not happen before the election.There are too many Democrats who are afraid of that for their own political reasons at home. So, if that happens, it‘s going to take place in the lame duck session when Democrats won‘t have to worry about being depicted as job killers.MADDOW: But this does seem like this is one of those cases where Washington and public opinion are very far apart. And that always represents a political opportunity, it seems to me.ALTER: Right.MADDOW: Because even if Republicans aren‘t willing to say—oh, geez, we got a problem with the oil companies, the whole country is looking what‘s going on in the Gulf and saying, oh, geez, we‘ve got a problem with the oil companies. So, their response has been so—I think, out of keeping with political—with public opinion, broadly.But it‘s also been crazy. I mean, Sarah Palin denying that “drill, baby, drill” actually meant drilling, the apologizing to BP, the conspiracy theories.You would expect the Republican missteps on this, large and small, to have some electoral impact.ALTER: Yes. Well, I think it might if the Democrats can capitalize on it.MADDOW: Yes.ALTER: If they can‘t, like, you know, they don‘t know how to—they should find another line of works if Democrats can‘t capitalize with where the BP Republicans have been. So the president started to try to do that, but, you know, making Joe Barton a household name requires attention. And he has to work at it over time to make Boehner and Barton household names—so that people understand, if they vote Republican for the House of Representatives and John Boehner becomes speaker and Joe Barton becomes chairman of the House Energy Committee, they will have a House of Representatives, and basically a Congress, that is not partly in the pocket of the oil industrial, but fully in the pocket of the oil industry and willing to apologize for BP.Do the American people want that? No. But, you know, who‘s going to tell the people that those are the stakes?MADDOW: Yes.ALTER: And so, that‘s the political challenge for Democrats—setting aside the energy bill, the sheer politics of it. The challenge is to make Joe Barton a household name, so that people understand the consequences of them voting Republican in November.MADDOW: One last piece of this that I find fascinating is the emergence of these conspiracy theories. And I know we‘re a conspiratorial people—that‘s part of what it is to be an American, it goes back a very long time. But it seems like right now, this is sort of just what happens in American politics. As soon as an issue goes on for long enough, it becomes subject to like—like stuff that makes the Freemason conspiracies look like, you know, fables.Is kind of—is this inevitable now?ALTER: Well, I think it‘s partly a sign of frustration on the part of the Republicans, because they thought that this oil spill and Obama‘s slow reaction to it was going to be political gravy for them. And they‘re starting to sense that it might turn against them, the politics of it are not working for them.MADDOW: Yes.ALTER: So they then, you know, lash out and come up with crazy conspiracy theories. But it‘s also just more indications of how this particular political party has been compromised by whack jobs and wingnuts and loony tunes. They‘ve always had this in the Republican Party. Remember the John Birch Society—MADDOW: Yes.ALTER: -- you know, in the ‘50s, ‘60s—MADDOW: And 2000s. They‘re back.ALTER: The difference was, that it used to be that you would hear from them like in newsrooms, we‘d get letters from them on the red typewriter ribbon, all caps. Well, now they have their own television network, right?So, they have more—the crazies have more sway than they used to. And they do have a lot of power within the Republican Party. And when you talk to serious, responsible Republicans, and they do exist, contrary to what some liberals think, you know, they‘re really upset about this—that their party is in danger of being taken over by lunatics.MADDOW: Compromised by whack jobs. I‘m going to put that on a bumper sticker and wait for the appropriate car to come along.(LAUGHTER)MADDOW: Jonathan Alter, a “Newsweek” columnist, MSNBC political analyst, and author of a book that is selling like hot cakes right now—congratulations on “The Promise.” Thanks.ALTER: Thanks a lot, Rachel.MADDOW: Good to see you, Jon. Thanks.ALTER: Good to se you.MADDOW: Still ahead, I will mix a gin and tonic for a good cause. It‘s about the deficit, actually, I promise. That‘s coming up later.And also, the British tried it, the Russians tried it, and now we are trying it—training up the Afghan army. But we‘re doing it in part by paying Afghan soldiers through their cell phones. So that‘s totally different, and I‘m sure it will work out totally different for us. That‘s all coming up.(COMMERCIAL BREAK)MADDOW: Do you know that NATO‘s fuel in Afghanistan is being dyed bright blue? Bright blue gasoline, bright blue diesel—not something I expected at all. But it turns out it has a simple yet bizarre explanation. That‘s ahead.(COMMERCIAL BREAK)MADDOW: Let‘s say someone wants to borrow some money from you and they say they‘re willing to pay you back at 36 percent interest -- 36 percent. You would jump on that amazing opportunity if your religion did not preclude you from doing so.So, in what universe is 36 percent interest actually a bummer? Such a bummer, in fact, that you would flee the state that wanted you to make that much? That would be this universe. The universe of payday lending, when you routinely make 400 percent interest on your loans, suddenly a measly 36 percent isn‘t looking so good.This, you‘ll recall, is Allan Jones, the founder of Check into Cash, and our favorite poster boy for the payday loan shark industry.Payday loan industry has been very, very good to Allan. All those high interest loans have bought him a town-size spread in Cleveland, Tennessee, that includes a regulation-sized football stadium of his very own, where college teams play private exhibition games. It‘s also got him a yacht, the Janie, that he bought for a reported $24 million, and later recouped some of the costs by renting it out, because, you know, he‘s good with money.He‘s also got a $300,000 Maybach, which apparently is a car. The thing is, it would be awfully hard to get the special wax you need to polish that $300,000 Maybach only 36 percent interest.On July 1st, the state of Arizona became the 16th state in the nation to limit payday loan interest rates. In Arizona‘s case, they‘re limited to 36 percent. And predictably, payday lenders are fleeing the state in horror. “The Arizona Republic” is reporting that payday lenders Advance America and Check ‘n Go are closing up shop in Arizona, heading for greener pastures and bigger rates of return.Meanwhile, now that Massachusetts Senator Scott Brown had time to put on his thinking shorts over the Fourth of July weekend, he announced today that he plans to be on board with Wall Street reform. And just tonight, Majority Leader Harry Reid announced that along with Scott Brown, he‘s also got Maine Republicans Olympia Snowe and Susan Collins on board. So he‘s planning a vote on Wall Street reform on the Dodd/Frank bill this week.That means—if that passes—that means that payday lenders are soon going to have to face—huh—federal regulation. They will be subject to the rule-making authority of the Consumer Financial Protection Bureau, and who knows what that means for their future? Maybe even, like those 16 states, a federal interest rate cap. Where will they run then?Actually, Arizona may provide a clue. Mr. Maybach, Mr. Private Football Stadium, Allan Jones‘ company, it‘s staying in Arizona. But now, it‘s just going to be in the business of making auto title loans, because you can still earn more than 200 percent interest on those.See, what‘s cool is it‘s like a pawnshop for cars. If the person you make the loan to doesn‘t pay up, you get their car. Maybe it‘s not a Maybach, but look at it this way, it‘s just the first step to one.We‘ll be right back.(COMMERCIAL BREAK)MADDOW: Tom Corbett is the Republican candidate for governor in the great state of Pennsylvania. He‘s just gone public with his position on jobs and his position is that unemployed people are unemployed because they want to be unemployed. Mr. Corbett explaining at a campaign stop in Elizabethtown, quote, “The jobs are there, but if we keep extending unemployment, people are just going to sit there.”“The jobs are there,” you hear that, Pennsylvania. Never mind what you hear about five applicants for every job there is in the country. Tom Corbett, Republican nominee for governor of Pennsylvania, says the jobs are there and you‘re just too lazy to take those jobs.It should be noted that that message that unemployed people are just lazy is not a Tom Corbett original. That message keeps turning up among Republican candidates this year.(BEGIN VIDEO CLIP)SHARRON ANGLE (R-NV), SENATE CANDIDATE: We have put in so much entitlement into our government that we really have spoiled our citizenry and said, you don‘t want the jobs that are available.(END VIDEO CLIP)MADDOW: That, of course, is Sharron Angle, Republican candidate for Senate in Nevada, saying that unemployed people are spoiled. Her fellow Nevada Republican, Congressman Dean Heller, recently warned that unemployment benefits may be creating a nation of hobos. He actually used the word “hobos.”And it‘s not just Republican candidates, a Republican congressman up for re-election.This attacking the unemployed thing is also being pushed by Republican leaders in Congress.(BEGIN VIDEO CLIPS)SEN. ORRIN HATCH ®, UTAH: You know, we should not be giving cash to people who basically are just going to go blow it on drugs.SEN. JON KYL ®, ARIZONA: That doesn‘t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.(END VIDEO CLIPS)MADDOW: The Republican Party appears poised to contest the elections this year on the basis of—hey, unemployed guy, we hate you.When they‘re not objecting to unemployment benefits on the basis that unemployed people are lazy and don‘t deserve them, the Republicans have another line of attack. They say if we are going to pay unemployment benefits to those lazy people, it can‘t be added to the deficit. Those benefits must be paid for.This week, the Senate is back in session and once again, Republicans are blocking the extension of unemployment benefits on the grounds that the deficit is just too big right now. We can‘t add those unemployment benefits for lazy people to the deficit.A few months ago, Republican Senator Jim Bunning started Republican objections to unemployment benefits when he stood alone in the Senate against them. Even though he objected alone back then, you saw the seeds of what‘s happening now among Republicans, when some Republicans at the time said they had Jim Bunning‘s back.(BEGIN VIDEO CLIP)KYL: This is a temporary extension, and it‘s over $10 billion. And all Senator Bunning was saying, quite correctly is, it ought to be paid for.(END VIDEO CLIP)MADDOW: Republican Senator Jon Kyl of Arizona, adding to his argument that unemployed people just don‘t want to get jobs—his conviction that any benefits for unemployed people can‘t be added to the deficit. They must, as he said, be paid for.Sorry, unemployed, lazy people, your benefits add to the deficit, so we can‘t help you.If there‘s one thing Republicans want voters to count on them for right now, it‘s to prioritize the deficit over all things. They really want to reduce that deficit. It‘s their main focus. Anything that‘s not paid for, sorry, we can‘t afford it, it‘s the deficit. No exceptions. No exceptions.Except one really, really expensive exception.(BEGIN VIDEO CLIP)CHRIS WALLACE, FOX NEWS: How are you going to pay the $678 billion just on the tax cuts for people over—making more than $200,000 a year?KYL: Chris, you should never raise taxes in order to cut taxes. Surely, Congress has the authority and it would be right to—if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending. And that‘s what Republicans objective. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.(END VIDEO CLIP)MADDOW: Tada! Remember, Jon Kyl is one of the Republicans blocking unemployment benefits for people who have lost their jobs because that can‘t be added to the deficit. But nearly $700 billion of tax cuts that benefit people who make more than $200,000 a year—tax cuts for rich people—those, go ahead and add them to the deficit.Just to be clear, a deficit is money into the government—like taxes—minus the money out of the government, like spending. That‘s it. Those are the only two ingredients—money in and money out.If you‘re saying you don‘t care about one of those things, if you‘re saying, taking in less taxes isn‘t a big deal to you, then the deficit isn‘t really a big deal to you. Those two things are equally important—the taxes coming in and the money going out. Disregarding one of them would be like saying, hey, let me make you a gin and tonic.All right. Here‘s a glass with some ice in it, right? I‘m making a gin and tonic. Here‘s the gin and tonic. Here you go. Here‘s your gin and tonic.Are you ready? There‘s your delicious gin and tonic. That‘s it.Taxes and spending are the two ingredients that combine to make the deficit and you‘re just going to not count the taxes part of it? That‘s like saying this is your gin and tonic, sorry, we don‘t have any gin, enjoy.If you say tax cuts don‘t need to be paid for, then you‘re faking it when you say you care about the deficit. You are faking it. You are lying. You are being stupefyingly ignorant. Take your pick.But if Democrats let them get away with this—let them get away with this argument against spending and for deficit-bulging tax cuts, if they let that argument win the day, Democrats are not just aiding and abetting stupefying ignorance and bad drinks, they‘re also digging their own political graves here. You win elections by improving the economy. And what the economy needs right now is stimulus—and no matter how much Republicans want to crow about tax cuts and how tax cuts are so important, they don‘t even need to be paid for, just load them on to the deficit.Tax cuts don‘t really stimulate the economy that well. What does is the unemployment benefits that Republicans are blocking.According to even the conservative economist Mark Zandi—here‘s how it works: every a buck that the government spends on an across-the-board tax cut creates $1.02 in economic activity. Not very much bang for that buck. Every dollar the government spends on unemployment benefits, on the other hand, creates $1.63 in economic activity. That money is spent. It goes right back into the economy.It makes sense. You‘re giving money to people who are broke and don‘t have jobs and desperately need money. They need to be able to spend that money. It goes into the economy, it drives demand, it helps the whole country‘s economy.Tax cuts help a tiny little bit, but nowhere near as much.This is one of those easy cases where the right politics and the right policy and the tasty drink line up together for Democrats.Republicans complaining about the deficit is hereby negated forever as long as they‘re still pushing for tax cuts for rich people to be added to that deficit.Democrats can do well politically in this case by going for policies that are actually right for commit, not policies that are only right for people who don‘t believe in math—or in gin.Joining us now is Ezra Klein, staff writer for “The Washington Post” and an MSNBC contributor. Ezra, thanks very much for joining us.EZRA KLEIN, MSNBC CONTRIBUTOR: Good evening.MADDOW: Is there some sort of secret deficit equation that Jon Kyl knows about that the rest of us don‘t? Is this one of these things where the right has their own fake facts about this that we just don‘t understand?KLEIN: No, we haven‘t actually even lifted the laws of arithmetic yet, even we have changed drink-making.No, I mean, this is an issue, right? You—there‘s a philosophical level in American politics, and on that philosophical level, folks on the right believe government should be smaller, tinier. And so, things that appear to make it that way, like cutting taxes such that the government doesn‘t have as much revenue to spend on things are held supreme. They don‘t function under the normal laws, because they are a matter of principle.But when you‘re right to balance a budget, when you‘re trying to run an economy, principle and pragmatism can sometimes come into conflict. And that‘s what we have here. You can‘t do this. You can‘t balance a budget. You can‘t care about the deficit and say that one of the two things that make a deficit don‘t matter. RACHEL MADDOW, HOST: The common wisdom right now that‘s being driven by Republicans, but not only by Republicans, is that the deficit has to be cut immediately, that government spending that has to stop. And say it‘s not only being driven by Republicans, because when I talk to Democrats, I often here them parroting that, not pushing back on that, not making an argument about that that‘s based on economic principles. Is that your experience here as well, that Democrats are sort of buying into this ridiculous line? KLEIN: Absolutely. And there‘s a real problem here, right? The deficit conversation is a tough conversation, because you can never tell if people are actually talking about the deficit. The deficit conversation works really, really well for minority parties important - because two things. One, during a recession, you need to have a deficit. It‘s how the government increases economic activity. That‘s why it‘s so important. That‘s what the stimulus funding functionally is, the government adding money to the economy. You tax it. You cut it from spending. You‘re just bailing water from one part of the boat into another part of the boat. And then, number two, when we actually get into these issues, the deficit is a great way for the minority party to try to stop spending, stop accomplishments, stop legislation. They argued it on health care, which actually reduced the deficit. They‘re arguing it on stimulus, which, by nature, has to increase the deficit. But - so it gets very, very difficult to say whether people are actually trying to recommend the tough policies that would reduce the federal debt, or they‘re now just trying to get short-term political gain. And what is so politically damaging about what Kyl did today is he showed it to be the latter. He said, “Actually, we‘re only worried about the deficit when it‘s something Democrats want to do. When it is our principles on the line, you know what, it‘s actually not that big of a deal. As a matter of principle, we don‘t need to worry about the deficit quite right then.”MADDOW: It‘s just - I mean, what it means is that there ought to be a caption or at least an asterisk that just appears on the lower third of the screen every time a Republican starts talking about the deficit right now, “Psst, I don‘t really mean this.” Last question for you. There does seem to be a disconnect between national politicians and state politicians on this. Governors across the country just held their conference in Boston. And Pat Quinn from Illinois said up there, quote, “I‘m disappointed in Washington. We can‘t have Herbert Hoover economics coming out of some of the members of Congress. They don‘t understand how you fight a recession. The federal government has to run a deficit in recessionary times because we‘ve got to get out of the ditch,” explaining some of what you‘ve just explained here. But why is it that governors get this, but not national Democrats? KLEIN: Because budgets to them aren‘t matters of philosophies. Look, state budgets in 2010 are looking at a $200 billion shortfall; in 2011, $180 billion shortfall. That‘s a massive anti-stimulus. That is contraction in the economy. And they know what happens if they can‘t fund that. They can‘t run a deficit. States 49 of 50, the exception being Vermont, cannot run deficits, constitutionally. So if they have to cut, what they do is they fire teachers. They let go of Medicaid. And when that happens, then their states go further into recession because people aren‘t spending money that they‘re now not getting and then their economies get harder. They don‘t have revenues. Deficits are larger. This is a terrible cycle, and the people who can interrupt it are the federal government. They can step into the middle, run a deficit, and pull people up. But if we have sort of a minority party that won‘t allow us to step into that gap, we‘re going to be in real trouble here. MADDOW: Ezra Klein, staff writer for “The Washington Post” and an MSNBC contributor and someone who makes these things very clear. Thanks a lot, Ezra. Appreciate it. KLEIN: Thank you. MADDOW: All right. Still to come, the conservative anti-ACORN Activist guy in the pimp suit has something happened to him that is way more embarrassing than even that coat. Please stay with us.(COMMERCIAL BREAK) MADDOW: There‘s big news today in the fake scandal that brought down the community organizing group ACORN. It turns out there may have been a scandal after all, just not the bogus one that Fox News and conservative activists promoted. Last September, a conservative Web site posted seemingly incriminating undercover videos taken at ACORN offices around the country. Two young conservative activists, James O‘Keefe and Hannah Giles, appeared to be dressed up as a pimp and prostitute in ACORN Offices, pretending to seek legal advice. The heavily and selectively edited videos were aired around the clock ad nauseam on Fox News. What those tapes seem to show, ACORN Employees seeming to give advice about illegal activity, caused a giant anti-ACORN freak-out - defund ACORN. In March, ACORN was forced to shut down, never mind no actual wrongdoing was ever proved. It does turn out now, though, that despite what we reported in the past, there may have been actual wrongdoing on those tapes, actual illegal activity caught and revealed in this undercover fake pimp and prostitute expose. It really may have been a scandal after all. And believe me, no one is more surprised than yours truly. We‘ve been reporting for months now that every official non-Fox News investigation into the case concluded that there was no wrongdoing. When congressional Republicans demanded an investigation, the Government Accountability Office agreed to look into it, to see if taxpayer dollars that went to ACORN were used improperly. GAO conducted its report. They released their preliminary report last month. It found that the nonprofit group did not misuse government funds. Back in April, California Attorney General Jerry Brown released a report on the case. His office found no illegal activity on the part of ACORN or any of its California employees. But according to a lawsuit recently filed in San Diego, James O‘Keefe and Hannah Giles, those conservative activists, may have caught two people breaking California state law. Seriously, it‘s true. Those people are James O‘Keefe and Hannah Giles, because in the State of California, it is illegal to record a confidential communication without the consent of all parties. The lawsuit was filed by Juan Carlos Vera. He‘s suing for at least $75,000 in damages. Mr. Vera was the ACORN employee supposedly caught on tape talking to the dynamic duo of O‘Keefe and Giles about how they could bring underage girls into the country illegally, only, that‘s not actually what happened, at all. Through Attorney General Jerry Brown‘s investigation, you may recall that we got access to the unedited tapes, not the versions that aired on Fox News. We compared the edited tapes to the unedited tapes. We reported on the distance between the edited and unedited tapes back in April. Consider this. During that same “not in a pimp suit trip to ACORN San Diego office,” Mr. O‘Keefe claimed he caught an ACORN employee giving advice on how to smuggle underage girls into the country. This is from the edited version of that trip that O‘Keefe released and Fox News aired over and over and over again. Watch. (BEGIN VIDEO CLIP) JAMES O‘KEEFE, UNDERCOVER INVESTIGATOR: Question, would ACORN employee Juan Carlos consult his contacts in Mexico to find a way to help us smuggle the underage girls into the United States from Tijuana? What things do you need from me in terms of the shipment information? What can I help you - what information would you further need, would help you in the advice that you‘re giving me? JUAN CARLOS VERA, ACORN EMPLOYEE: The location. O‘KEEFE: The location? VERA: Yes. O‘KEEFE: Where? Whereabouts, like, what type of - like, city, state - what do you need? VERA: The location they‘re going to take the girls.O‘KEEFE: Is it better if it‘s Tijuana? Is it better if it‘s somewhere inland? Where is the best place? I‘m not quite - there‘s like all these answers he wants right away? VERA: It‘s better if it‘s Tijuana. O‘KEEFE: Tijuana? Why? VERA: Because I have a lot of contacts in Tijuana. O‘KEEFE: OK. And they might be able to assist in crossing the border? VERA: Yes. O‘KEEFE: OK. There‘s like 12 of them, is that OK? VERA: Twelve? O‘KEEFE: Twelve. HANNAH GILES, UNDERCOVER INVESTIGATOR: Twelve girls. O‘KEEFE: There‘s 12 girls, but they‘re like 13 to 15 years old on. (END VIDEO CLIP) MADDOW: Damning video, right? Damning, billed by people like Fox News host Sean Hannity as cold, hard evidence of ACORN aiding and abetting this crime. (BEGIN VIDEO CLIP) SEAN HANNITY, HOST, “HANNITY”: This new, never-before-seen undercover footage shows the great lengths that one ACORN official is willing to go in order to help set up a prostitution ring, once again, involving underage girls. Now, the man on this tape even offers to help smuggle underage illegal immigrants into the U.S. for the purposes of prostitution. (END VIDEO CLIP) MADDOW: Actually, what you don‘t see in that fox news report is the rest of the video, which shows the ACORN employee pressing, pressing, pressing for as much information as he could possibly get from these two people in his office. (BEGIN VIDEO CLIP) VERA: So the telephone number is 2017 - what area is that? O‘KEEFE: It‘s from - I‘m from back east. I‘m actually originally from New Jersey. VERA: OK. So you don‘t know what date? GILES: They‘re coming on Saturday. O‘KEEFE: Saturday morning. Yes. GILES: Yes, like Friday night, Saturday morning, right? O‘KEEFE: Like really late, though. In the middle of the night. GILES: Like between 2:00 a.m. and 5:00 a.m. VERA: So they‘re working then? GILES: They‘re working on their, you know, arrival.(END VIDEO CLIP) MADDOW: So why is he asking for stuff like phone numbers, dates of arrival, specific location? All these details? What‘s this ACORN guy going to do with all that information? What does he do with all that information? Oh, he calls the police and reports what they‘ve told him is going to be a crime. Quoting from the attorney general‘s report, “Immediately after the couple left, Mr. Vera telephoned his cousin, Detective Alejandro Hernandez, at the National City Police Department and said that a self-admitted prostitute had been to the office and was discussing human smuggling. Detective Hernandez contacted detective Mark Haas at the San Diego Police Department. Detective Haas works with cases involving human smuggling.”

So that ACORN employee, who, by the way, doesn‘t speak English all that well, did the responsible thing. He elicited as much information as he could get out of the supposed pimp and prostitute in his office and then he immediately reported it to the police. For that, he ended up getting fired after fantastical interpretations of his actions like these aired on Fox News. (BEGIN VIDEO CLIP) GILES: He told us it would be best if they were shipped into Tijuana because he had contacts there that could help us. HANNITY: Yes. GILES: It was extremely unusual and we‘re, like, “Oh, you can -“ and he goes, “Yes, my people have experience getting - bringing across the border.” (END VIDEO CLIP) MADDOW: Yes. Remember when he said, “My people have experience.” Yes. That was actually you that said that. The fact that the ACORN Employee collected all that information, including phone numbers and dates the supposed crime was planned for and passed that information to the police, that never made that into that Fox News report on this outrage at the San Diego ACORN office.That never did make it into the Fox News report, but what did make it in shows James O‘Keefe and Hannah Giles tape recording that man, Juan Carlos Vera, without his knowledge or approval, which is illegal in California. For the first time since this ginned-up, manipulated scandal broke, there is concrete, seemingly well-founded evidence of illegality. So of course, Fox will play this story on a loop too, right?(COMMERCIAL BREAK) MADDOW: Coming up on “COUNTDOWN,” do you have issues with your new iPhone? Keith will tell you how to fix it. Next on his show, why NATO is dyeing its gasoline blue in Afghanistan. All that and much more.(COMMERCIAL BREAK) (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: 22,000 acres. That far mountain range, not this near one, but the far mountain range is the outer limit. MADDOW: You‘re kidding? UNIDENTIFIED MALE: That is how large this place is. MADDOW: The far - not the near ground though? All right -UNIDENTIFIED MALE: That‘s right. The one that‘s about six miles (UNINTELLIGIBLE). MADDOW: Wow. UNIDENTIFIED MALE: 22,000 acres. And in Afghanistan, this is really, truly, the largest and the most deliberate formal training locations. MADDOW: What was this location before it was this? UNIDENTIFIED MALE: It has always been, you know, compliments of previous occupiers. I think they kind of developed - I think they built some of these buildings right there. (CROSS TALK) UNIDENTIFIED MALE: (UNINTELLIGIBLE) especially in our day. I can‘t comment on that. MADDOW: But certainly the Soviets left their mark here. UNIDENTIFIED MALE: They did and you can see a number of different vehicles here. And what‘s real interesting is that the general is an armor officer and he remembers when he was a cadet attending school, that was the armor school right there the (UNINTELLIGIBLE) that building. MADDOW: Wow, that‘s unbelievable. UNIDENTIFIED MALE: But we were able to recapitalize a lot of the space here. Off to your front, you see probably somewhere in the order of 1,500 or 2,000. Those are soldiers against that hillside there. And they are conducting battle drills, react to IEDs, react to ambushes and things like that. UNIDENTIFIED MALE: (UNINTELLIGIBLE) in terms of squares of soldiers. MADDOW: Exactly. UNIDENTIFIED MALE: But you know, the state organized. MADDOW: Looks like a game of “Risk.” UNIDENTIFIED MALE: Yes. UNIDENTIFIED MALE: Yes, yes, yes. (END VIDEO CLIP) MADDOW: That‘s me and Lt. Col. Mike Lowes(ph) at the Kabul military training centers at well as Brig. David Patterson from NATO. All 22,000 acres of that military training center - many of those acres littered with dead Soviet tanks, as you can see here. In fact, there are so many dead Soviet tanks on this training ground that they use heavy equipment to move them around, to make them into boundaries for various training grounds. The fact that the Soviets used this spot for military training and the British before them used that spot for military training and now we‘re using it for military training is a bracing little reminder that we are not the first empire to try to swagger or stalk or slog through Afghanistan. That said, some of the way we are slogging through is very 21st century. Take, for example, efforts to counter the legendary corruption among Afghan security forces. There‘s no real banking system for everyday Afghans, so traditionally, if you want to pay an Afghan soldier, you pay his commanding officer in cash. Then the commanding officer doles out whatever cash he thinks that soldier should get. Totally ripe for corruption, right? Soldiers don‘t know what exactly they‘re entitled to and commanders take whatever they can get away with. To get around that, the NATO training mission in Afghanistan has started paying soldiers by cell phone. Although there isn‘t a robust banking system and literacy is not great, just every soldier can be counted on to have a mobile phone. So when payday comes now, Afghan soldiers get sent on their phone a message containing the amount they‘re due to be paid and a code. They then take that to a mobile phone shop and the shop gives them their pay. The idea is to standardize and professionalize the military and cut commanding officers out of an opportunity to steal from their troops. The corrupt commander officers, though, have adapted as well. Rather than just directly stealing cash from their soldiers on payday like they used to, now, they‘ve started stealing their soldiers‘ SIM cards out of their phones on payday to try to steal from them that way. Another anticorruption measure by the NATO training mission concerns gasoline. According to British Colonel Stuart Cohen(ph), when NATO realized that fuel for Afghan police and army vehicles was being pilfered, being stolen, they came up with a solution straight out of a bank heist movie. They started dyeing all their gasoline blue. They literally call it “Operation Blue Dye.” They say that by dyeing all their gasoline blue and thereby discouraging stealing it by making it very obvious when it‘s been stolen, they‘ve cut their fuel costs by 10 percent. So some of what‘s going on at this ancient place where foreign armies have always tried to train up local forces is new. Some of it is downright brand new, like training female recruits. These Afghan women are in training to be police officers. There are also women training to be part of the Afghan national army at this site. When I was in southern Afghanistan, at a checkpoint between Kandahar city and the Arghandab district, I saw some confusion and some concern on site when a U.S. company commander reported that male Afghan police officers were able to search women, female Afghan civilians coming through the checkpoint. The U.S. officers said, culturally, the officers were able to do it as long as they didn‘t actually lay hands on the women. They instead just used metal detectors. A few moments later, though, Afghan policemen at that check point themselves clarified that actually they weren‘t searching women civilians at all, that they wouldn‘t even consider doing that without female Afghan officers available to conduct the searches. So the need for female officers is definitely there. But you can imagine the incredible obstacles and taboos that Afghan women have to get through in order to do this kind of work. (BEGIN VIDEO CLIP) MADDOW: May I ask specifically - it‘s striking to me after having been in Afghanistan for just a few days now, to see something like this where half the line is female and half the line is male. Are there cultural issues, cultural resistance issues, with having women out here on the firing line? Yes. UNIDENTIFIED MALE: It‘s not a big problem right now, because the problem - when we have the possibility, we both two different arrange - MADDOW: Yes. UNIDENTIFIED MALE: One for men, one for women. But right now, we have very good training, as you can see, and every day we have 120 students plus, more or less 20 women.MADDOW: Yes. UNIDENTIFIED MALE: Plus some of the training that ongoing - they are coming, this is a problem. MADDOW: Yes. UNIDENTIFIED MALE: But I - we have to go to the management because it‘s here (UNINTELLIGIBLE). UNIDENTIFIED MALE: I think, again, on a serious issue here and it‘s the readiness of Afghan society to accept women in traditional roles that have always been those played by men. But you know, the ministry of interior and ministry of defense are both pushing this very hard. In the ministry of interior, they‘re going to grow 5,000 new police patrolmen, NCOs and officers over the next five years. And they are vitally required in communities for family violence. They‘re required at border checkpoints for searches, but also to socialize the force and more accurately reflect the way this society‘s going. MADDOW: Even just being out on the checkpoints that I saw in southern Afghanistan, they are already feeling the need for women to be able to search people going through checkpoints. UNIDENTIFIED MALE: That‘s right. And in some of the structuring we‘ve done with the Afghans this year, we have pushed the insertion of women much further ahead than we would have done otherwise. But it‘s a big program and there‘s some societal challenges to training women. MADDOW: Yes. UNIDENTIFIED MALE: The ability of a woman to stay for a long period of time, you know, in a training institution. Married women with children actually are the predominant part of the population that come out here, and it‘s very hard for them to leave their families to train. MADDOW: True. UNIDENTIFIED MALE: But they are very mature policemen when they graduate. And so they really add to the professionalization of the force. (END VIDEO CLIP) MADDOW: That‘s me with an Italian Carabinieri officer and Major General Mike Ward. He‘s Canadian. He‘s in charge of training the Afghan police for NATO. The top American in charge of training of the police is Brig. Gen. Anne MacDonald, who, in this context, was kind of amazing to meet. Here she is, the deputy commanding general for police development overseeing Afghan women training to become officers. And Gen. McDonald herself was in the first graduating class at West Point that included American women. (BEGIN VIDEO CLIP) MADDOW: In reading your bio, it doesn‘t say this but I did the math. As far as I can tell, you were in the first - you graduated from West Point in 1980 which was the first year that they - that West Point graduated female cadets, is that right? BRIG. GEN. ANNE MACDONALD, U.S. ARMY: That‘s correct. That‘s correct. MADDOW: A, thank you for being a pioneer in that regard. MACDONALD: Cool. MADDOW: But B, I wonder if you see some of your own career reflected in those young female police recruits we saw on the range today. MACDONALD: Yes. Absolutely. The other day, I had a chance to go to the officer candidate school, and I looked at these young women. And 1,001 thoughts went through my head. I said wow, that‘s where I was. And I used the expression that they are making the first footprints in the snow. And it‘s amazing how excited they are, what a great opportunity they have now. And some of them may not even realize it, that someone has opened the door for them, and now is their chance to be and to learn - and yes, absolutely - absolutely. (CROSS TALK) MADDOW: (UNINTELLIGIBLE) chance for more people behind them. MACDONALD: Absolutely. And I think it‘s such a wonderful thing. And because of that, I feel humbled to be able to even speak to them and talk to them and say you know, try to - any kind of motivating word I can say that will encourage them to stay committed to what they‘re doing. (END VIDEO CLIP) MADDOW: Male and female Afghan civilians are willing to take on the risk of signing up for the police or the army for a lot of different reasons. One of the most interesting reasons, I found, is because joining up is actually a fairly good opportunity to learn to read. That, plus why it matters what kind of gun that is that I‘m holding very awkwardly there will be on tomorrow‘s show. We‘ll be right back.(COMMERCIAL BREAK) MADDOW: I‘m traveling to Washington, D.C. tomorrow for an exclusive interview with Richard Holbrooke, our nation‘s special envoy to Afghanistan and Pakistan. That interview will air right here on THE RACHEL MADDOW SHOW tomorrow night, 9:00 p.m. Eastern and 6:00 Pacific. That does it for us. “COUNTDOWN WITH KEITH OLBERMANN” starts right now. Have a good night. THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.END <Copy: Content and programming copyright 2010 MSNBC. ALL RIGHTS RESERVED. Copyright 2010 Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of Roll Call. 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